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Operator
Hello, and welcome to EVI Industries' earnings call for the first quarter of the fiscal year ending June 30, 2023. This is Henry Named, Chairman and CEO of EVI. Before we proceed, we would like to disclose our cautionary statement. This earnings call contains forward-looking statements as defined by SEC laws and regulations. Forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our earnings press release issued today and in our SEC filings, including the risk factors section of our annual report on Form 10-K for the fiscal year ended June 30, 2022. Actual results may differ materially from those expressed in or implied by the forward-looking statements. This call also includes a discussion of adjusted EBITDA, which is a non-GAAP financial measure that the company believes is useful in evaluating performance. Please refer to our earnings press release issued today for additional information regarding adjusted EBITDA, including how we define adjusted EBITDA and a reconciliation of adjusted EBITDA to net income, the most comparable GAAP financial measure. Today, I will summarize our operating results for the first fiscal quarter and share our progress in connection with our long-term objectives. For the first quarter, we achieved record operating performance in a substantial number of important financial metrics. This is a testament to the well-synchronized efforts of our over 650 employees dedicated to serving our customers while executing on a series of initiatives in pursuit of our long-term operating performance goals. We believe that these results also reflect our values and principles, including upholding financial discipline, maintaining an entrepreneurial culture, empowering our leaders to operate locally, and staying focused on the long term. Each of these has been instrumental to our success thus far. While we are still early in our long-term strategy to build the undisputed leader in the North American commercial laundry industry, we are starting to realize some of the benefits of our market strategy And given our success and position in the industry, we believe that business owners, OEMs, customers, and prospective leaders will continue to be attracted to joining the EGI family and or to working with our company in the future. About our operating performance, we had an excellent start to our fiscal year. We reported record first quarter revenue of approximately $84 million, record net income of $2.8 million, and record adjusted EBITDA of $6.5 million or approximately 8% of revenue. This revenue performance reflects steady fulfillment of customer sales orders from our backlog and from appropriately stocked inventory, installations in connection with equipment sales, ongoing maintenance and repair services, and the sale of parts and accessories. These factors contributed to a 31% increase in revenue as compared to the same period of prior fiscal year despite continued supply chain challenges. As I've stated in prior calls, our sales force is the backbone of our company. We employ the single largest sales organization in the industry with priceless industry knowledge acquired over decades of experience. They actively build quality customer relationships and secure new business opportunities for our company. Combined with our growing array of products and support resources, our company and sales professionals are equipped with the capabilities to serve commercial laundries of all types and sizes. In addition to the significant increase in revenue, gross profit increased 39% to a record $24.5 million, and gross margin increased 160 basis points to a record 29.4%. Our continuous improvement in gross margin is driven by, among other factors, new business intelligence derived from the deployment of advanced operating technologies that have improved pricing analytics. Additionally, a core aspect of our growth strategy is to build a national installation and service network capable of serving customers across all four commercial laundry categories. Executing on this part of our growth strategy has also driven new and higher margin sales opportunities for our company. The increases in revenue and growth profit offset an increase in operating expenses, which was largely driven by operating expenses related to acquired businesses, our continued investment in the deployment of new and advanced operating technologies, and other efforts in connection with our optimization goals. Ultimately, operating income increased 64% from $2.7 million to a record $4.4 million, net income increased from $2 million to a record $2.8 million, adjusted EBITDA increased 49% to a record $6.5 million or to approximately 8% of revenue, and diluted earnings per share increased from 15 cents per share to a record 20 cents per share. We feel that our results validate our belief that with greater size of loan, we can achieve a higher level of operating leverage. While our business is getting bigger, our leaders are also making smarter and faster decisions resulting from our collaborative leadership culture and better information provided by the advanced technologies we continue to deploy across our company. Given the effectiveness of the initiatives we have undertaken, we remain confident in our ability to achieve a greater level of operating leverage as we scale up our business to provide our customers more products and services in and around the commercial laundry business. On acquisitions, during the first quarter, we continued to execute on the buy component of our long-term growth strategy as we completed two acquisitions. The first acquisition was K&B Laundry Service, which is a provider of installation and maintenance services to the industrial and on-premise laundry segments. This acquisition enhances our installation and service capabilities to our growing customer base across the Southeast region of the United States. The second acquisition was Aldridge Cleantech, which is a distributor of commercial laundry products and a provider of related installation and maintenance services to commercial laundry customers in the Northeast region of the United States. Following the completion of the first quarter, we announced and closed on our third acquisition of fiscal 2023 and our 23rd acquisition since the inception of our long-term growth strategy. As I've mentioned many times, our long-term focus buy and build strategy requires planting seeds that we believe will result in attractive buy opportunities through which we will achieve significant revenue and profitability growth our approach requires thoughtfulness discipline patience and a nurturing culture all of which we have demonstrated with the addition of these high quality businesses given the health and strength of our company and the robust pipeline of acquisition opportunities in and around the commercial laundry industry we remain excited and optimistic about our long-term growth plans and outlook. Moving to our balance sheet, since the commencement of our long-term buy and build strategy, we have been aggressive in our pursuit of growth, but consider opportunities based on disciplined financial principles. We have utilized a debt conservative approach that we believe has provided us with ample flexibility to navigate turbulent times and to simultaneously capitalize on attractive growth opportunities. Net debt at the end of the first quarter was $32 million, which reflects an $8 million increase as compared to June 30th, 2022. The increase in net debt is the result of our continued investment in working capital and acquisitions completed during the quarter. Despite the increase, we continue to have a strong balance sheet with low leverage and ample liquidity provided by our recently renewed $140 million credit facility. As a result, We believe we have the flexibility to continue buying high-quality businesses, investing in working capital, and building our business in pursuit of our long-term goals. Finally, on our long-term strategy and goals, I want to reiterate that just six years ago, we embarked on a long-term journey to build the undisputed leader in and around the commercial laundry industry, and in doing so, produce attractive returns for our shareholders over the long term. As we have stated from the beginning, We're a long-term growth-focused company that is thoughtful and committed and that acts with conviction when the opportunity is right. We have stayed true to our financial principles, consistently acquired good businesses, strengthened our customer value proposition, and improved gross margins and operating margins. We also believe that we are just beginning to realize the benefits of our optimization initiatives. Supporting these efforts is a collection of dynamic, well-respected, and entrepreneurial leaders from across the commercial laundry industry. Our approach and results have earned us a positive reputation in and around our industry, including among owners of quality businesses, which we may add to our growing EVI family, and among talented professionals who we may seek to hire. For these reasons and the others mentioned during this earnings call, we remain excited and optimistic about our long-term growth plans and outlook. This concludes my comments related to the first quarter of fiscal year ended June 30, 2023. In closing, I want to thank our valued employees, our loyal suppliers and customers, and our shareholders for your support and participation in EBI. Until next time, be well.
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